5.10 Stochastics indicator trading instructions



http://www.capexforextrading.com/forex-technical-indicators The stochastics indicator is a great tool to use to identify overbought and oversold areas of a trend. It is made of up two lines: 1. %K line 2. %D line What these lines are, how they are calculated and what they mean is not relevant. However, you do need to know that the standard setting for the indicator is 14,3,3. 14 relates to the number of last trading sessions and the 'two threes' relate to the %K and %D lines. In the stochastics indicator window we have two major levels that are emphasized - 20 and 80. In simple terms, when stochastics are over 80 the market is overbought and when it is below 20, the market is oversold. To make the stochastics indicator a bit more reliable we have to combine it with a 200 period exponential moving average. Doing this will confirm trend direction. So, when prices are below the 200EMA we focus on down-trends and when they are above it, we focus on up-trends. To trade stochastics, we need to look for pull-backs in the trend. For example, when analysing an up-trend we wait for a pull-back to be in an oversold stochastics position. If the low of the pull-back is higher than the previous low that was in an oversold stochastics position, we take the trade. However, make sure you wait for stochastics to cross back over the 20 level line first. In the video we also show you how to use stochastics with diversion and trend line breaks so ensure you watch the full video and leave any comments below.

Comments

  1. great video.
    the trading strategies were explained very well to my understanding
  2. awesome lesson
  3. Thank you for this great video lesson. Easy to understand and very informative.


Additional Information:

Visibility: 4018

Duration: 9m 3s

Rating: 24